Merkel Confronts Growing Skepticism on Bailout Aid to Cyp

By Patrick Donahue -
Jan 9, 2013

Chancellor Angela Merkel confronted
a growing chorus of skepticism from inside and outside Germany’s
coalition on bailout financing for Cyprus, possibly endangering
her majority among lawmakers who will have to approve any aid.

Rainer Bruederle, the parliamentary leader for Merkel’s
Free Democratic coalition partner, told Bild newspaper he sees
no majority in the lower house as long as German taxpayers have
the impression that they’re bolstering tax evaders. He echoed
statements from opposition Social Democratic Chairman Sigmar Gabriel, who told Sueddeutsche Zeitung newspaper the SPD won’t
support a Cyprus bailout in its current form.

“There are too many question marks surrounding Cyprus,”
Bruederle told Bild in an interview yesterday. “From what is
known currently, I don’t see a majority for financial aid.”

The roadblock to the latest bailout in the debt crisis
could hamper euro-area finance ministers already squabbling with
the International Monetary Fund on how to help the Mediterranean
island nation. The package, which could match the size of
Cyprus’s 18-billion-euro ($23.5 billion) economy, will have to
keep the country afloat while assuaging northern European
skeptics bracing for the fifth euro-region rescue program in
three years.

Merkel signaled that a final decision on Cyprus could be
held up. Euro finance ministers who had aimed to lock in a deal
this month may delay it until March, after the country’s
presidential election next month, Handelsblatt reported.

‘Long Way’

“There can’t be special conditions for Cyprus, we have the
same rules throughout Europe,” Merkel said in Berlin yesterday
after meeting with Maltese Prime Minister Lawrence Gonzi.
“We’re a long way from the end of the talks.”

Cyprus’s government believes the nation’s debt will
ultimately be sustainable, spokesman Stefanos Stefanou said
yesterday in comments posted on the Cyprus government website.

Euro ministers are awaiting the results of next month’s
presidential elections in Cyprus, after which President Demetris Christofias leaves office, according to Handelsblatt.
Christofias has rejected proposals to sell off state assets.

Merkel will join European allies at a gathering of
conservative party leaders in the Cypriot port city of Limassol
tomorrow. She has no plans to meet members of the government,
Steffen Seibert, Merkel’s chief spokesman, told reporters in
Berlin yesterday.

Euro ministers are at loggerheads over Cyprus with the IMF,
which wants Cypriot banks to be recapitalized directly from
bailout funds, according to Handelsblatt. In Germany, SPD
Chairman Gabriel was among German politicians attacking euro
member state support of the Cypriot banks.

‘Tax Fraud’

“At this stage, I can’t imagine that German taxpayers will
rescue Cypriot banks whose business models are based on abetting
tax fraud,” Gabriel told Sueddeutsche Zeitung.

“My parliamentary colleagues may be jumping to conclusions
somewhat,” Michelbach said in an interview. “On the face of
it, we have our concerns given the intransparency of Cyprus
banking, the scope of the aid request vis-a-vis annual GDP and
the origin of many deposits. But we certainly do not have a
position on the request at this time.”